Pan American Lithium Corp. (PL-TSXV, PALTF-Pink Sheets)

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May 7, 2010 Issue

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Pan American Lithium Corp. Is Focused On Becoming One Of The First Companies To Bring A Lithium Project Into Production In Chile Atacama Region III

Company Profile:

Pan American Lithium Corp. (TSX-V: PL) (Pink Sheets: PALTF) is a junior lithium exploration company which owns interests in nine salar projects with the potential to produce lithium and other metals from surface lakes and subsurface brines, all located in the mineral-rich Atacama Region III of Chile. The rights in these nine lithium salars cover a cumulative area in excess of 11,500 hectares, all accessible via serviceable roads.

 

The Company also has an option to acquire indirect interests in a geothermal lithium brines project at the Cerro Prieto geothermal power plant located in Baja California, Mexico, roughly 30 km south of the city of Mexicali.

Andrew Brodkey
President and CEO

Andrew Brodkey is currently President and CEO of three junior mining companies---Pan American Lithium Corp., Zoro Mining Corp., and Pacific Copper Corp., He has been a mining industry professional for over 25 years, working with and for Fortune 100 companies as well as junior mining entities. Brodkey earned a bachelor's degree in mining engineering from University of Arizona in Tucson before obtaining a law degree at Creighton University in Omaha. He has worked as a mining engineer, a mining lawyer and in minerals business development. As Vice President and General Counsel for Magma Copper Company, and Vice-President, Business Development for BHP Copper Inc., he successfully negotiated and closed numerous complex domestic and international mining transactions, including mergers and acquisitions, privatizations, recapitalizations, joint ventures and partnerships. Immediately prior to entering the management of junior resource companies, he was the founder and Managing Director of the CB Richard Ellis International Mining & Metals Group.


Resources
Lithium
(PL-TSXV, PALTF-Pink Sheets)


Pan American Lithium Corp.
3040 North Campbell Avenue

Suite 110

Tucson, Arizona  85719
Phone: 520-989-0031

 

Interview conducted by: Walter Banks, Publisher, CEOCFOinterviews.com, Published – May 7, 2010


CEOCFO: Mr. Brodkey, would you give us a little history on Pan American Lithium?
Mr. Brodkey: Pan American Lithium is a relatively new company as we have only been in the market since December 2009. We are listed on the Toronto Stock Venture Exchange under the ticker symbol PL and that is the TSX Venture Exchange. We are also Pink Sheeted in the United States under PALTF, but we are seeking a full Bulletin Board listing and that process is started and ongoing. Hopefully it will be completed over the next several months.

CEOCFO: Are you one of the founders?
Mr. Brodkey: Yes I am. The company’s original projects came in through a Vend-in that was completed in December of 2009. The lithium projects that the company has are all located in the country of Chile, South America and they are all relatively clustered and close to one another in what as known the Chile Atacama Region III. That is in an area of the country that is in the north part of Chile and it is about 700 kilometers north of the capital of Santiago. My partner in South America, who’s name is Harold (Hal) Gardner has been a resident of Chile, although he is a United States citizen. He has been a resident in Chile, in Region III, for probably the last 20 to 25 years and he has been very busy putting together very outstanding property packages in different commodities. It just so happened that he had assembled this package of prospective lithium properties consisting of these 9 different salars and it became the subject of the Vend-in that I mentioned previously that was completed in December of last year (2009). So I have been affiliated with Hal Gardner and collectively with his group and we Vended those different properties at the end of last year.

CEOCFO: Was Harold Gardner in Chile prior to your partnership with him?
Mr. Brodkey: Yes. I have been working with Harold Gardner for the last 3 to 4 years, but he has been very active in Latin America for a very long time period before that. He has been on the ground for about 25 years, which is well before most of the current mining activity. In particular, Region III Chile has been historically difficult to reach and underexplored. There wasn’t full-time air service into the capital of Region III, which is a small city called Copiapo, until about 8 to 10 years ago. You could get to other parts of Chile, but typically to get to Region III, you had to take a bus from Santiago, which was a half-day trip and that was discouraging for mining companies. However, Harold Gardner fought through all of that and really did a good job of being one of the first pioneers of US citizens and US interests being active in the mining industry in that part of Chile.

CEOCFO: What has changed; is it the better access now?
Mr. Brodkey: Absolutely. There are regularly scheduled flights into Copiapo. The area has been the subject of a lot of exploration efforts from many different domestic and international companies. However, that wasn’t the case until relatively recently; it was probably one of the last regions in Chile prospected for mining that has seen a rush of companies to come into play.

CEOCFO: What is your goal in Chile; is it just exploration or is it development or partnering in the future or even selling off when you get to a certain stage?
Mr. Brodkey: I can tell you quite candidly, we want to be one of the first actual lithium projects built and operating. We have got some very beneficial advantages that we think are going to get Pan American Lithium to the point where it will be able to realize its goal and be one of the first in production.

CEOCFO: So what is the vision for the company?
Mr. Brodkey: Let me give you five or six bullet points that summarize what the Pan American Lithium story is. First, we have technically sound lithium projects, which are located in a very stable mining friendly jurisdiction, which is Chile, which are very quick to resource definition, to feasibility and ultimately, into production, headed by a strong sophisticated management team with considerable Latin American expertise. We will be in the lowest quartile of costs of lithium projects worldwide. We project to be in that lowest quartile and as we become more proficient in defining our projects, we will take on either strategic off-take, marketing or investment partners that will ultimately seal the deal for our company. We will have our production spoken for before we ever turn the first spade of dirt on building the project.

CEOCFO: Where are you in the process at this point in Chile?
Mr. Brodkey: I am happy to tell you that we are very advanced. For a little bit of background, the lithium industry has been proliferated over the last couple of years by a lot of smaller companies, including ours. They have seen the opportunity and have spent effort putting together properties and then, trying to make companies out of those properties. The reality is that very few of these projects are ultimately going to get built, even though there is a big demand for lithium. You have to be one of the first ones down the line, in terms of actually showing that you are going to go into production and having a real project before the market is going to believe you. So getting back to your inquiry, we are there. In terms of the first big milestone, the first big step, we expect and as we have told the market already, that by the end of this month we will have what is known as an inferred resource estimate done on our first project. Physically our lead projects are different than almost all of the other lithium brine projects. Just a little bit of background, you find lithium in different forms in deposits the earth’s crust or in waters. First, the highest cost projects are the hard rock projects, which are typical mining projects, such as a gold, silver or copper mining project. You have to crush rock and pull the metal out and there are lithium projects like that, but compared to the other types of lithium available in the world, they are very high on the cost curve. Then you have lithium in forms such as muds and other minerals that are still going to be at least mid to high cost projects. Lastly, you’ve got the lithium brine projects and those are the lowest cost projects. Those will be the competitive projects worldwide, and we are starting to see the analysts that are becoming active in the lithium industry, recognize that the brine projects are the ones that are really competitive and have the greatest chances of actually being built.

All of our projects are brine projects, and what I can tell you about  our brine projects is that  our lead project is a surface lake, and the name of the lake is Laguna Verde. It is over 15 square kilometers on the surface and has a mean depth of over 30 meters, so it holds a lot of fluid. There are very few lakes that hold lithium brines. The brines also contain, besides lithium, other light metals. The typical light metal suite is lithium, potassium, calcium, magnesium and sometimes boron. Most if not all of those products are generally commercialized from the brines, not just lithium, but also the other co-products. However, the uniqueness of Pan American Lithium is pretty understandable when you look at what we have. We have this big surface lake, which is easy to get to and lends itself to very quick resource definition. All of the other projects that we are aware of, all of our competitors’ projects are known as sub-surface brine projects and thinking about what it looks like and visualizing it, they have sort of a moonscape. You have a crusty surface, and my analogy is the Bonneville Salt Flats, because people in the US generally know what that looks like. That is where they take out the high speed cars and set world speed records for jet powered cars. It looks like moonscape and that is what the surface is of most of the other competitor brine projects. The brines are underneath the surface. All of our competitors have to drill down and do exploration like a typical mining project. They need to put in a series of wells, test the wells, and understand the formation that hosts the brines, which is again sub-surface. They have to know how thick is it, how porous and how permeable the formation is, and conduct a host of other exploration activities. So there is a significant timeline and a significant cost in exploring those projects, and our competitors have no choice but to spend that time, effort and money to determine what they have. Contrast that with what Pan American Lithium has; we have a lake. It was simple, we took a boat out on the lake, and we measured the depth. We took samples on the surface, we have taken samples at various depths in the lake, and that translates into a resource estimate. So as we have told the market, at the end of this month, we will have the resource estimate. We will be the first company we think that is a Toronto Stock Venture Exchange company that will have a resource estimate published for a brine project and we are miles ahead of everybody else.

CEOCFO: Would you educate us on the value of lithium today and where the lithium market is going?
Mr. Brodkey: Most of the prognosticators expect that it is growing and it is growing dramatically. The current consumption of lithium carbonate equivalent, and that is generally the measurement that everybody uses, is 85,000 tonnes per year. The actual consumption of lithium carbonate or lithium products are across a fairly wide spectrum of industries including the ceramics industry and lubricants. However, the largest sector that is growing for lithium demand today is the battery sector, and that is what gets all of the headlines and what gets people excited. Lithium is being used because of its high storage capacity, low weight to power ratio and other technical features. Lithium as it is used in battery storage make it the element of choice for new battery applications. The battery sector inside the lithium space is growing at rate of 25% to 30% a year. Most people agree that the 85,000 tonnes per year is going to become significantly more in terms of worldwide demand. We generally use a rule of thumb, in that it is probably going to be 250,000 tonnes of lithium carbonate demand by the year 2015, which is only five years away from now. So there is going to be a big explosion in demand, and companies that get in and do what Pan American is trying to do, which is to be first in the market, lowest quartile on cost, with off-take or on marketing partners that will speak for your production; those are the ones that are going to be successful. We are dedicated to moving down the road quicker than anybody else and attempting to try to get into actual production faster than our competitors, so that we can help meet this demand that has clearly been identified.

CEOCFO: So it is sort of a right time and right place for Pan American Lithium.
Mr. Brodkey: Absolutely!

CEOCFO: What is going on in Baja California, Mexico for you?
Mr. Brodkey: Pan American Lithium has an option to acquire an interest in an existing project. It doesn’t produce lithium yet, but with the right application of energy and technology, we will be able to. The situation is a follows. Since about 1970, the Mexican government has operated a geothermal electricity facility, a big geothermal power plant in Mexicali, which sits on the border, between Baja California, Mexico and the United States state of California. It is however, on the Mexican side and they have been tapping a fairly significant geothermal well field. The power plant has been in operation for over forty years and it happens to be the second largest geothermal facility in the world. It makes about 720 megawatts of power from deep geothermal wells and it is being expanded. They are looking at putting in a fifth unit; I think the feasibility has been done, they are just awarding the contract to expand by another 100 megawatts, so the total capacity of the plant will be 820 megawatts of power, which is pretty significant. The Mexican government agency, which is the CFE (Comision Federal de Electricidad) has sunk over $1 billion and probably closer to $2 billion worth of costs in drilling the wells that have been utilized and putting in all of the infrastructure from these wells, which are 3 to 4 miles deep. This should give you a sense of what is going on there today and how much has been invested by the Mexican government in getting this power plant up and keeping it up and running.

Our situation is really a very nice one, and very beneficial for a lithium company like ours. The power plant has drilled these deep wells, and they pump fluids from beneath the surface through these wells. When, the brines come to the surface, they represent two fractions, first, the steam fraction which is siphoned off, goes to the power plant, runs through their boilers and heat exchangers, and produces electricity. The cooler liquid fraction contains the brines, which are not used by the power plant at all. They are simply sent out to evaporation ponds that the power plant has built and are used for disposal. However, that is our feedstock, so the beauty of the situation becomes pretty apparent. We are investigating the final financial, legal and other details, to earn a piece of this project and get the lithium and the other metals from these brines. Should we decide to exercise the option we would be getting the benefit of this incredible amount of sunk investment in the existing infrastructure of the power plant. Pan Am would essentially receive, cost free to us, the brines containing the lithium, potassium and other elements that we are going to be able to process. So we are saving billions of dollars of capital expenditure on infrastructure, because somebody else has already paid for it and we don’t even have to pump. This leaves us with dramatically reduced operating costs because we will be able to take these solutions in the evaporation ponds. From that point forward, it is our responsibility to design these optimal processes to recover the lithium and the other metals. It is similar to the lakes in Chile. In fact, we have projects in both Chile and Mexico, where there is virtually no exploration risk because nothing needs to be done. Somebody else has already done it or there isn’t any exploration to be undertaken because of the nature of the project. That is the story of Mexico and Chile.

CEOCFO: Do you have the financing in place to continue to grow you company or will you have to go to the street to raise more funds?
Mr. Brodkey: The answer to that is twofold. First, our exploration is done, so we won’t have to spend any money on that, but yes, we will be moving immediately into feasibility in Chile. Then if we obtain the Mexican project,
depending upon the financial arrangements with our partners in Mexico, we are more likely to be in a carried position, where we won’t have to spend any money at all to take that project forward. We will have a carried interest all the way through feasibility, the building of facilities, commissioning and actual production. So probably with the way things are working in Mexico, we won’t need any capital. However, Chile is different, as we will need money to commence our scoping, chemistry phase process design, and feasibility. Therefore, yes, we are considering different sources of funding, whether it be the street, some private placements through institutional investors that we have relationships with or potentially through strategic off-take partners. The answer is we are embarking upon additional fund raising as we speak today.

CEOCFO: In closing, address potential investors and why they should consider Pan American Lithium?
Mr. Brodkey: Pan American Lithium has projects that are going to be quicker and very cost competitive with the other lithium projects among the junior companies that have been announced. The investor and the analysts should start to hopefully understand the real distinctions between projects that Pan American Lithium has, which are real projects, versus a lot of the other noise that have been announced from other people that have similar brines projects. I’m not even talking about the hard rock projects and the mud projects for lithium, because those are high cost and the most people are discounting them already today. However, among the brines projects, we are in a highly favorable jurisdiction, which is Chile, while most of our competitors are in Argentina or Bolivia. You really need to start to analyze closely all of the factors that make up a project, including  rates of return, fiscal regime, royalties, taxes, the realities of permitting, water rights, etc. and look at the whole package of the issues that surround lithium brine projects. As people start to educate themselves, they are going to start to understand the realities and advantages of advancing projects in a very mining friendly, mining favorable jurisdiction like Chile. Chile has a long, storied rich history of supporting the mining industry, good mining laws and good laws on titles and tenure and permitting and the whole nine yards. That is where our projects are located.

Even beyond that, our projects have advantages built in; we have lakes rather than underground projects that our competitors have to spend tons of exploration money and time on. At our lead lake, we are ready to go to tell the world very shortly the quantity of lithium contained in that lake. Immediately thereafter, we are on to scoping, feasibility, process and design. Our competitors are going to lag, and they have to lag because with underground projects they don’t have the ability to access their projects like we do in our lake. So if you take the totality of the circumstances, being in Chile, verses being in Argentina or Bolivia, and having a very pro-mining regime, pro-mining in the sense of not just on tenure and ownership, but very favorable on tax and investment and royalties, compared to the other places, people will start to see the differences between Pan American Lithium’s projects and the projects of our competitors. When they look at everything in a total light, they will conclude that we have real projects and have strong financial returns associated with them—projects that are going to be built. In addition, we are going to be quickest into the markets. So that is what I hope that most investors would take away from this discussion.

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So if you take the totality of the circumstances, being in Chile, verses being in Argentina or Bolivia, and having a very pro-mining regime, pro-mining in the sense of not just on tenure and ownership, but very favorable on tax and investment and royalties, compared to the other places, people will start to see the differences between Pan American Lithium’s projects and the projects of our competitors. When they look at everything in a total light, they will conclude that we have real projects and have strong financial returns associated with them—projects that are going to be built. In addition, we are going to be quickest into the markets. So that is what I hope that most investors would take away from this discussion. - Andrew Brodkey

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